Permira Advisers, one of Europe’s biggest private-equity firms, is stepping up its investments in Japan, encouraged by government moves to give greater power to shareholders.
Permira, with €25 billion ($27.7 billion) under management, wants to invest in companies in the information technology, recruitment and fitness sectors that are planning to expand their operations, according to Ryo Fujii, the recently appointed managing director and Permira’s Japan country head.
Fujii pointed to government moves to give more power to company shareholders — such as a so-called stewardship code introduced last year and a corporate governance code in June — and the change in corporate attitudes toward private-equity investors over the past decade.
“With the introduction of the stewardship code and corporate governance code, the management of companies can now look at things through shareholders’ eyes,” Fujii said in an interview last week. “Having a conversation with private equity has also become possible. That’s something that was unthinkable 15 years ago.”
Carlyle Group’s decision to take Hitachi Metals Techno Ltd. private in March this year as part of a ¥28.9 billion management buyout is an example of the type of deal that is now possible in the friendlier climate for private equity firms, Fujii said.
Japan’s stewardship code enlists institutional investors to push company management for better returns, while complementary rules for companies seek to instill greater market discipline. They include provisions aimed at eliminating a practice known as cross-shareholding, where friendly stock owners tend to protect executives even when they underperform.
Private-equity firms completed 71 Japanese investments in the first half of this year, up from 60 in the same period the previous year, though the overall value nearly halved to $1.56 billion from $2.99 billion, according to S&P Capital IQ, a data and research provider. The total value of transactions rose 38 percent to $4.65 billion in 2014 from a year earlier.
Fujii joined Permira from KKR & Co. earlier this year as part of plans to accelerate investment in Japan, which has only seen two Permira acquisitions in the past 10 years.
He said Permira will target companies with size ranging from “a few hundred million dollars to a few billion dollars.” Companies in the information technology, recruitment and fitness sectors are attractive because of demographic and lifestyle changes in Japan, he said.
Permira’s only investments in Japan to date were Arysta LifeScience Ltd., an agro-chemical company purchased in 2008, and Akindo Sushiro, a sushi restaurant chain which it bought in 2012 for €895 million. Permira sold Arysta earlier this year.
The buyout firm is currently talking with several potential investment targets, Fujii said. It wants to bring other investors such as Japanese pension funds into its deals, he added.
“There are a lot of expectations for Japan,” said Fujii. “No one was interested in Japan about three years ago. We are coming from a place where no one was interested in Japan to ‘Isn’t Japan interesting?’ So that is a considerable change.”
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